- Coinbase has evolved as a competitive player in the ever-changing crypto scene, always pushing the boundaries of innovation and reshaping the industry.
- Coinbase (COIN) has established dominance, surpassing nearly all firms looking to list ETFs, including BlackRock, Franklin Templeton, and WisdomTree.
- Custody is a crucial part of the campaign to bring a spot Bitcoin ETF to the US market. Custodians hold assets on behalf of others.
Coinbase exchange played a significant role in spot Bitcoin ETFs, not giving competitors much room. Here’s how Coinbase is powerful in ETFs!
Coinbase and Its Role in Spot Bitcoin ETFs
Coinbase has evolved as a competitive player in the ever-changing crypto scene, always pushing the boundaries of innovation and reshaping the industry. Coinbase’s latest move that sent shockwaves through the financial world is its entry into Bitcoin Exchange Traded Funds (ETFs).
As the crypto market evolves and regulatory frameworks develop, the expected approval of Bitcoin ETFs marks a turning point. Coinbase’s strategic entry into this sector raises the question of whether the game is over for others.
The race to provide custody services, a critical infrastructure piece for Bitcoin (BTC) ETFs, has not been a highly competitive one so far. Up until now, the crypto exchange Coinbase (COIN) has established dominance, surpassing nearly all firms looking to list ETFs, including BlackRock, Franklin Templeton, and WisdomTree.
This leaves out BitGo, a significant player in the field, which is a notable absence. Hashdex is the only firm in the US that has not selected a custody partner for its Bitcoin ETF. Seyffart from Bloomberg mentioned that he would not be surprised if BitGo participates in a Bitcoin ETF application in the future. Gemini, a cryptocurrency exchange, became the first third-party custody partner for the VanEck application.
Custody is a crucial part of the campaign to bring a spot Bitcoin ETF to the US market. Custodians hold assets on behalf of others. In this case, it means protecting the Bitcoin that ETFs will own – likely worth billions of dollars – from hackers and other malicious actors.
Coinbase Seizes Market Advantage
Under the leadership of CEO Brian Armstrong, Coinbase currently serves as the custodian for nine out of the planned 12 Bitcoin ETFs in the US. This concentration level, which may be a concern for some, places Coinbase in a dominant position. Fidelity chose to custody its own funds, and VanEck preferred Gemini, with only one application not specifying a custodian.
However, due to the lack of regulatory clarity in the US, finding additional candidates is challenging, narrowing the list of eligible businesses.
“While it is striking that most products are choosing Coinbase, and I understand why people might be concerned, as long as Coinbase can provide security, I don’t see an issue. We probably need to see how things play out over the next months and years,” said James Seyffart.
Analysts speculate on how the approval of such instruments will affect the crypto business during a period where the Securities and Exchange Commission (SEC) must decide on a significant number of applications for spot bitcoin exchange-traded funds (ETFs) within two months.
According to Dan Morehead, managing partner at Pantera Capital, the size of the applicants, including the world’s largest asset management companies such as BlackRock and Fidelity, among other giants, will be more effective than the launch of crypto futures by the Chicago Mercantile Exchange in 2017 or Coinbase’s initial public offering on Nasdaq in 2021.
JPMorgan analysts share the same view. They note that with Bitcoin rising by more than 50% in the last two months and momentum building towards ETF approval, its impact may be less positive on specific industry players. JPMorgan analysts state that cryptocurrency exchange Coinbase (COIN), by serving as a custodian and surveillance partner proposed in many applications, positions itself as an inevitable player in the ETF race. However, they suggest that Coinbase may face losses with the entry of new investors into the market.
“Medium-term, we view ETFs as a competitive threat to Coinbase. Given the initial allure of Bitcoin and Ethereum, many new investors are likely not to look beyond these leading tokens and thus may not need Coinbase’s services,” said JP Morgan.
